- FTSE 100 index up 42 points
- BoE does not rule out negative interest rates
- UK sells first bond with negative yields
3.45pm: Bank of England not ruling out negative interest rates
FTSE 100 rose 42 points to 6,046 heading to close, potentially aided by Bank of England chair Andrew Baily not ruling out negative interest rates.
“We do not rule things out as a matter of principle, that would be, I think, a foolish thing to do,” he was reported as saying by City A.M., “That doesn’t mean we rule things in either.”
“We’re not ruling it in but we’re not ruling it out,” he concluded on his appearance before the Parliament’s Treasury Committee.
Meanwhile, sterling was up 0.2% to US$1.2274.
On the other side of the pond, the Dow returned to 24,600, reversing yesterday’s losses despite Donald Trump’s comment on the relation between China and the ongoing pandemic.
Some wacko in China just released a statement blaming everybody other than China for the Virus which has now killed hundreds of thousands of people. Please explain to this dope that it was the “incompetence of China”, and nothing else, that did this mass Worldwide killing!
— Donald J. Trump (@realDonaldTrump) May 20, 2020
2.35pm: UK sells first ever bonds with negative yields
The Footsie gained 25 points to 6,028 in the early afternoon, after the UK government sold bonds with negative yields for the first time.
The UK Debt Management Office sold a three-year bond with a yield of -0.003%, raising £3.75bn, in a twice oversubscribed auction.
This meant that investors will get less money that they paid now when the bond matures in 2023.
For the first ever, the UK has sold government bonds with a negative yield. This means that global investors are paying the UK to look after their money for them. Even so the @UK_DMO auction was 2.15 times oversubscribed. https://t.co/ArRmNTdket
— Ian Fraser (@Ian_Fraser) May 20, 2020
Negative interest rates have been seen in Europe already, and give investors some degree of certainty that they will be paid back.
“[The sale] will also fuel the debate over the Bank of England’s interest rate policy and whether they will follow the ECB’s lead by taking official rates negative,” Quilter Cheviot’s Richard Carter told the Evening Standard.
“Recent comments by MPC members suggest they are keeping their options open and could ‘go negative’ if the economy flat lines during the second half of 2020.”
Meanwhile, Wall Street opened higher as per forecasts: the Dow Jones added 287 points to 24,494, while S&P500 rose 37 points to 2,960.
1.35pm: Rightmove says housing market needs lower deposit for first-time buyers
FTSE 100 was on the rise after lunch, bagging a rise of 31 points to 6,027.
The current average is £24,189 for a 10% deposit, up to £36,284 if 15% is required, MarketWatch reported.
“If lenders are able to offer more attractive lower deposit mortgages it would help sustain the recovery in activity,” Miles Shipside, Rightmove founder and housing market analyst, was reported as saying.
“If it can be done responsibly, with strict affordability criteria, then a return to more mortgage offers of 90% loan-to-value, or even 95%, could make a huge difference to someone having enough money now for a deposit or having to save up for another few years.”
12.05pm: Wall Street to open higher despite Moderna’s coronavirus vaccine woes
The Footsie held its gains at lunchtime, adding 10 points to 6,012.
Futures indicate US indices will open higher later today, following yesterday’s dip caused by criticism of Moderna Inc’s (NASDAQ:MRNA) coronavirus vaccine candidate.
Earlier this week, the US biotech firm published interim clinical data reinforcing its belief that the mRNA-based vaccine could prevent infections without serious side effects.
However, according to a report published on Tuesday night by STAT news, some scientists believe that, based on the current available data, there is no way to prove how effective the jab is.
STAT also pointed out that the usually vocal National Institute for Allergy and Infectious Diseases, a partner of Moderna in the project, declined to comment on the clinical data.
“It seems traders should treat every trial result with caution given the volatility around both Gilead and Moderna announcements over recent weeks,” said Josh Mahony, an analyst at IG.
“Every specialist seems to indicate that a vaccine will take some time to develop, yet markets treat each trial announcement like we are on the cusp of a huge breakthrough that could see everything swiftly return to normal.”
Shares in Moderna dropped 6% to US$67.50 in premarket trading.
11.15am: Rolls-Royce to sack 9,000 people as part of cost-saving plan
The Footsie swung back in the green in late morning, up 13 points to 6,015, though sterling also rose 0.1% to US$1.2268.
The engine maker is aiming at yearly savings of at least £1.3bn and will also cut spending across other areas as it reacts to the decline in demand as coronavirus hits air travel.
However, the cash costs related to the restructuring is likely to be around £800mln over this and the coming two years.
“While job cuts had been widely trailed at Rolls-Royce, the decision to lay off more than 15% of its global workforce still carries weight and highlights the damage coronavirus is doing to the company,” noted Russ Mould, investment director at AJ Bell.
“The long-term implications of such lay-offs should not be underestimated either. If or when the aviation sector takes flight once more, Rolls might need to recruit and train a whole raft of new people, affecting the pace of its own recovery. Rolls doesn’t have the luxury of looking too far ahead; for now it simply needs to keep itself in the air while it tries to navigate extreme market turbulence.”
10am: Inflation slows down in April but not bottomed yet
FTSE 100 briefly fluctuated above the 6,000 mark in mid-morning, but then headed back underwater, after the latest reading showed a slowdown in inflation.
London’s leading index shed 7 points to 5,994, while the pound dipped0.1% to US$1.2235 from earlier highs.
UK consumer price inflation was 0.8% in April, down from 1.5% in March, mostly due to lower oil prices and analysts expect it to drop further.
Experts say it may take months for the figure to bottom as consumer spending and business activity slow due to coronavirus.
James Smith, an economist at ING Economics, forecasts inflation might touch zero over the summer.
Recovery from the crisis is expected to be gradual rather than V-shaped, mostly due to the dire jobs market, he says.
“While the government’s Job Retention Scheme has been successful in slowing the speed of unemployment so far, there are growing fears that we could see a wave of redundancies later in the year depending on how the furlough scheme evolves. This would imply that wage pressures are set to remain largely muted,” Smith commented.
On the other hand, supply constraints could push some prices higher as demand begins to return and supply chains readjust to new safety measures.
New requirements could also mean a need for more workers.
“Still, the broader economic picture of consumer and business caution suggests that demand will take a long time to recover – and that implies inflation is going to stay generally muted. We don’t expect the UK economy to return to its pre-virus size until 2022 at the earliest,” Smith concluded.
8.50am: Further falls for Footsie
The FTSE 100 index beat a retreat in early trade on Wednesday as optimism around a potential coronavirus vaccine has well and truly faded.
The index of UK blue-chips fell 39 points early to 5,963.43.
The market’s dip into the red reflected a “tamping down” of expectations around US firm Moderna Inc’s inoculation, analysts said.
“A report from Boston Globe Media’s STAT news cast doubt on the success of the vaccine trials, not because they necessarily were a failure, but because the company failed to provide the ‘critical information’ to allow the rest of the scientific community to assess the vaccine’s efficacy,” said Connor Campbell of Spreadex.
On the market, much song and dance was made of Marks & Spencer PLC’s (LON:MKS) trading performance, which appears not to have been as dreadful as anticipated. M&S shares on the FTSE 250 index rose 3.6%.
Reacting to the prelims, Michael Hewson of CMC Markets said: “As numbers go these could have been a lot worse, and it is clear that M&S reacted quickly to the pandemic. The decision to cancel some of its summer stock was a shrewd move, while the dropping of the dividend, while painful was also necessary.”
No surprises that the credit checking services of Experian (LON:EXPN) are in demand as the world heads into recession. It showed its confidence in the future by holding its dividend payment, prompting a 5.6% jump in the share price.
Proactive news headlines:
Mosman Oil And Gas Ltd (LON:MSMN) has announced a deal to sell its stake in the Welch oil field in Texas, for US$300,000. It has received a US$30,000 deposit and the balance will be paid within 30 days. It said proceeds raised through the sale will facilitate investment in its Stanley project and provide working capital, supporting the company whilst oil prices remain low. Welch is producing and has development potential but Mosman noted that a prior ranking exercise determined that the Stanley and Greater Stanley projects offer “better growth”. The field generated a gross profit of A$264,619 in the six months ended December 31, 2019.
Gfinity PLC (LON:GFIN) announced that it has signed an agreement with Formula 1 motorsports Grand Prix group F1 to deliver the main elements of the F1 Esports Series in 2020, 2021 and 2022. The AIM-listed firm said it will deliver the Pro Draft Reveal show and the Pro series in 2020, the Challenger Series qualifying events, Pro Draft live show and Pro Series in 2021 and qualifying events in 2022. Under the terms of the contract, Gfinity will deliver a dedicated account management team to deliver all elements of the programme, provide a full league operations team to write all rules and govern drivers participating in the tournament and provide the use of its proprietary ‘Race Control’ in-race adjudication system. The company will also use its arena in London as the main venue for live broadcasts.
Jersey Oil & Gas PLC (LON:JOG) said it has now completed the process to re-acquire Equinor’s stake in Licence P2170, in the North Sea, which is host the Verbier discovery. In return, Equinor receives two milestone payments and a royalty based on volumes produced from the Verbier Upper Jurassic (J62-J64) reservoir. It is one step in the consolidation of multiple valuable but modest discoveries into a hub development project, to be known as the Greater Buchan Area (GBA) project.
Eden Research PLC (LON:EDEN), the sustainable biopesticides specialist, has reported further approvals for its Cedroz bionematicide distributed by partner Eastman Chemicals. Italy has granted Cedroz a second 120-day emergency-use authorisation period ahead of its growing season, while full approval has been granted in the Netherlands. Cedroz tackles root-knot nematodes, a pest that causes severe damage to crops globally, both in an open field and greenhouse situations. Separately, Eden said it has been notified the use of another if its products Mevalone has had approval in Greece expanded to include several minor diseases on olives and tomatoes.
Echo Energy PLC (LON:ECHO) has told investors that its production and operations have continued uninterrupted amid the coronavirus (COVID-19) pandemic and remains in-line with expectations. In a statement on its operations in Argentina, Echo said that net production is anticipated to average 2,250 barrels oil equivalent (boe) per day or 310,474 boe in aggregate. “Having moved quickly to implement measures to protect our staff, contractors and operations from the impact of COVID-19, I am pleased to report that production at Santa Cruz Sur has continued without interruption and is in-line with company expectations,” Martin Hull, Echo’s chief executive added.
Bango PLC (LON:BGO) said it has successfully launched carrier billing routes in the Google Play store for new operators in Asia, Latin America and Africa. The mobile commerce group said customers in Peru, Hong Kong and South Africa will now be able to pay for content and services in Google Play by using the Bango Platform to charge the cost to their phone bill.
Silence Therapeutics PLC (LON:SLN) said it has strengthened its leadership ahead of a listing on the American growth market, Nasdaq. It also confirmed it is in discussions with other potential commercial partners after inking a major deal with AstraZeneca earlier this year. And it laid out the timeline for progressing its two key drug candidates. As part of a comprehensive shake-up the firm, which specialises in gene silencing, has also brought on board Investec as its broker and nominated advisor.
Bloomsbury Publishing PLC (LON:BMY) has said it is basing its outlook on a gradual recovery in book sales to begin in July amid the coronavirus pandemic, the firm revealed alongside its latest annual results on Wednesday. That would be a severe downside scenario, it added, but on this basis it has sufficient financial headroom to cope. Costs have been cut across the business, said chief executive Nigel Newton and the company has assumed print revenues decline by 65% over the period to July before starting to pick up again through to March 2021. Print book orders accounted for almost four-fifths of Bloomsbury’s revenues in the year to February and these have been severely disrupted by the coronavirus pandemic lockdowns, he said, even though demand has increased for digital, audio and e-books.
Faron Pharmaceuticals Oy (LON:FARN) (NAASDAQFIRSTNORTH:FARON) has shared the peer-reviewed analysis of the effects of a drug given to severely ill patients that help explain the unexpected read-out from the company’s 2018 phase III clinical trial of its then lead drug, Traumakine. The article in ‘Intensive Care Medicine’ looks at the role played by glucocorticoids when used in harness with intravenous interferon beta-1a such of the type developed by Faron. It found the mechanism of action interferon beta-1a was blocked by glucocorticoids. Faron chief executive, Dr Markku Jalkanen, hailed the Intensive Care Medicine article as a “crucial publication”.
OptiBiotix Health PLC (LON:OPTI) announced that it has entered into a non-exclusive license agreement for its SlimBiome trademark with Evolution_18 and the related launch of fibre gummies containing OptiBiotix’s SlimBiome proprietary weight management technology. The life sciences business, which is developing compounds to tackle obesity, high cholesterol, diabetes and skincare noted that Evolution_18 is a US-based company founded by Bobbi Brown who is known for turning a simple makeup line, Bobbi Brown Essentials, into a billion-dollar global brand with Estée Lauder Companies.
Collagen Solutions PLC (LON:COS) has announced that Collagen Solutions (US) Inc. and Collagen Solutions (NZ) Limited, its wholly-owned operating subsidiaries in the USA and New Zealand, respectively, have received a mix of loan and grant funding based on those governments’ coronavirus (COVID-19) economic support programmes. The AIM-listed developer and manufacturer of biomaterials and regenerative medicines for the enhancement and extension of human life noted that Collagen Solutions USA received US$240,000 in US government-backed loan funding. It added that Collagen Solutions NZ also received NZ$35,000 from the New Zealand Ministry for Social Development’s Wage Subsidy Scheme.
Metal Tiger PLC (LON:MTR) said it has completed a further equity derivative collar financing arrangement with its lender secured over 328,798 shares held by the company in Australian explorer Sandfire Resources (ASX:SFR). Under the terms of the agreement, AIM-listed Metal Tiger has entered into a stock lending arrangement allowing the lender to borrow the Sandfire shares. As a result, the company has borrowed around A$1mln from the lender secured on the above terms with a maturity date of May 18, 2023. Metal Tiger said the proceeds of the financing will be used to fund “a near term substantial investment opportunity” as well as other potential investments.
Arix Bioscience PLC (LON:ARIX) said its portfolio company, Amplyx Pharmaceuticals, has closed a US$53mln Series C ‘extension’ fundraising round, taking the total to US$90mln New investors included Pfizer and Adage Capital. UK-listed venture capital company Arix has a 3% stake worth US$6.4mln. Amplyx will use the cash injection to develop fosmanogepix (APX001) and MAU868 for the treatment of life-threatening fungal infections and BK Virus.
IXICO PLC (LON:IXI) has reported higher earnings for the first half of its current financial year, while also highlighting that its order book has “strengthened further” since the period-end. For the six months ended March 31, 2020, the brain imaging and neuroscience data specialist reported underlying earnings (EBITDA) of £700,000, up from £100,000 a year ago, while revenues jumped by 33% to £4.6mln. EBTIDA margins also rose in the period to 14.8% from 4%, while profit per share increased to 1.01p from 0.46p. Looking ahead, IXICO said it ended the period with an order book of £15.3mln, however, this has risen to over £22mln in April following the signing of more contracts.
Newmark Security PLC (LON:NWT) has said demand for hygiene screens and night pay hatches has risen due to the coronavirus outbreak, but noted that the overall impact of the pandemic remains uncertain. In a trading update for the year to April 30, 2020, the AIM-listed group said activity in the second half of the year was broadly in line with management’s expectations, though had started to slow from April onwards. As a result, revenues for the year will be slightly below the previous twelve months though the impact on group operating profit is not yet clear, the group added.
Sativa Group PLC (LON:SATI), the Aquis Exchange-quoted leading quoted CBD wellness and medicinal cannabis group, which announced on April 22 that it had entered into a letter of intent with StillCanna regarding a possible offer for the company has said the UK Takeovers & Mergers panel has consented to an extension of the deadline, until 5.00pm on June 3, 2020, to enable the parties to complete the compilation of the necessary information and due diligence before the announcement of a firm intention to make an offer. By this time the offeror must either announce a firm intention to make an offer for Sativa or announce that it does not intend to make a bid. Henry Lees-Buckley, CEO of Sativa commented: “Our due diligence in respect of StillCanna is progressing well and our expectation is to complete this process in the coming days.”
Amur Minerals Corporation (LON:AMUR), the nickel-copper sulphide mineral exploration and resource development company focused on the far east of Russia, announces that Ljupco (Lou) Naumovski is stepping down as a non-executive director of the company with immediate effect in order to concentrate on his other business interests but will continue to support the company as an advisor to the board. Robert Schafer, Amur’s non-executive chairman commented: “We thank Lou for the time, energy and input that he has provided to Amur. His Russia-specific knowledge and experience is of great value to the Company and we look forward to continuing working with Lou in his capacity as an advisor to the Board.”
Redx Pharma PLC (LON:REDX) has announced that SPARK Advisory Partners Limited has been appointed as the company’s nominated adviser with immediate effect.
Iconic Labs PLC (LON:ICON), a multi-divisional new media and technology business, announced that it has received a notice of exercise from European High Growth Opportunities Securitization Fund in respect of the exercise by the investor of its conversion rights under the bonds issued in respect of the first tranche drawn down under their financing and settlement agreement for the aggregate principal amount of £80,000 resulting in the issue to the Investor of 800,000,000 new Iconic Labs ordinary shares.
Thor Mining PLC (LON:THR) (ASX:THR) has said it will be presenting at a webinar hosted by Amvest Capital, a New York City-based specialist investment manager and corporate finance firm focused solely on the natural resources sector on Thursday, May 23, 2020, at 11.00am US Eastern Time. It added that Mick Billing, the group’s chairman and CEO will be presenting the webinar. The company said subscribers to the company’s announcements will be provided with a link to the webinar and a copy of the presentation will be available on the Thor Mining website via the following link: http://thormining.com/sites/thormining/media/pdf/interviews/thor-mining-202005.pdf
6.40am: Lower start predicted
The FTSE 100 is expected to start lower on Wednesday after a report raised doubts over the viability of a coronavirus vaccine
Spread-better IG is predicting that the blue-chip index will open down around 20 points after ending Tuesday’s session 46 points lower at 6,002.
Markets seem to have been spooked overnight by a report from the Boston Globe Media’s STAT news service, which said a coronavirus vaccine candidate from US biotech Moderna may not have produced the data needed to assess the effectiveness of the treatment against the disease.
The news, alongside predictions that an economic recovery could be protracted, helped drive US markets down overnight with the Dow Jones Industrials Average closing 1.59% lower at 24,206 while the S&P 500 fell 1.05% to 2,922 and the Nasdaq Composite dropped 0.54% to 9.185.
Doubts over the vaccine as well as the spectre of a long economic recovery from the pandemic also saw a mixed picture in Asia this morning, with Japan’s Nikkei 225 up 1% while Hong Kong’s Han Seng was down 0.04%.
Following yesterday’s record-breaking UK unemployment figures, investors will also be nervously eyeing today’s CPI inflation data which is predicted to fall to 0.9% in April from 1.5% in March, with the recent oil price plunge expected to have weighed heavily.
The data could provide some catalysts for the pound, which was up 0.15% at US$1.2262 against the dollar on Wednesday morning.
Significant announcements expected for Wednesday:
Finals: Marks and Spencer Group PLC (LON:MKS), Severn Trent PLC (LON:SVT), Bloomsbury Publishing PLC (LON:BMY), Experian PLC (LON:EXPN), Great Portland Estates PLC (LON:GPOR), HICL Infrastructure PLC (LON:HICL), Wincanton Plc (LON:WIN)
Economic data: UK inflation, UK PPI, US Fed minutes
Around the markets:
- Sterling: US$1.2262, up 0.15%
- Brent crude: US$34.96 a barrel, up 0.89%
- Gold: US$1,747 an ounce, up 0.17%
- Bitcoin: US$9,727, up 1.95%
- The UK economy is unlikely to “immediately bounce back” from the coronavirus crisis and could suffer permanent scarring, Chancellor Rishi Sunak has warned, as jobless claims soared – Financial Times
- Compass Group, the world’s biggest catering firm, has raised £2bn from investors to shore up its finances as the schools, offices and sporting venues it previously supplied remain largely closed – Guardian
- EasyJet has revealed that the personal information of 9 million customers was accessed in a “highly sophisticated” cyber-attack on the airline – Guardian
- Brussels state aid rules are blocking desperate companies from accessing emergency support by, according to business groups demanding more help from the Government – Telegraph
- Facebook has unveiled an online shopping venture which will allow businesses to set up digital storefronts and sell directly to users on the platform; the move puts it in direct competition with Amazon and eBay – FT
Published at Wed, 20 May 2020 14:44:00 +0000-FTSE 100 bags another few points; Bank of England not ruling out negative interest rates